Micron Reports First Profit Since 2011 Amid Price Rises

June 20 (Bloomberg) -- Micron Technology Inc. reported
fiscal third-quarter sales and profit that topped analysts’
estimates as the largest U.S. maker of memory chips benefited
from price increases.

Net income for the period ending in May was $43 million, or
4 cents a share, on revenue of $2.32 billion, the Boise, Idaho-based company said in a statement yesterday, marking a return to
profitability after two years of losses. Analysts on average
estimated a profit of 3 cents on sales of $2.25 billion,
according to data compiled by Bloomberg.

Market prices for memory chips, which store information in
computers and mobile devices, have gained as manufacturers such
as Micron, Samsung Electronics Co. and SK Hynix Inc. have slowed
increases in output to avoid a supply glut. The balance between
supply and demand will last for at least the rest of this year,
according to Doug Freedman, an analyst at RBC Capital Markets.

“The market’s good,” said Freedman, who is based in San
Francisco and rates Micron outperform, the equivalent of a buy.
“This won’t roll over too quickly.”

Micron’s shares, which have more than doubled this year
amid an anticipated increase in chip prices, are trading near a
six-year high. Micron was the second-best performer in the
Philadelphia Stock Exchange Semiconductor Index this year
through yesterday. The stock fell 3.1 percent to $13.54 at 9:51
a.m. in New York.

‘Historic Highs’

“We remain somewhat cautious, as valuation appears to be
near historic highs,” said Ada Menaker, an analyst at MKM
Partners LLC. At current levels, the stock already reflects
“positive pricing trends driven by a tight supply
environment,” Menaker, who has a neutral rating on the shares
and a $13 target price, wrote in a research report.

Micron is acquiring Japan’s Elpida Memory Inc. to gain
control of more manufacturing facilities and further stabilize
prices. The company makes dynamic random access memory, or DRAM,
which provides the main memory in personal computers. It also
makes Nand flash memory, chips that provide the storage in
mobile devices such as smartphones and tablets.

The balance between demand for those chips and supply will
probably remain favorable for the rest of this year, according
to Mark Adams, Micron’s president. While the PC industry is
suffering shrinking unit shipments, DRAM makers have matched
supply to market conditions, he said.

‘Supply Recovery’

“We think this is a supply recovery,” Adams said in a
telephone interview. “The PC side of the house is definitely
not driven by a demand curve that is up and to the right.”

Micron and its competitors remain reluctant to invest in
new plants that might flood the market with unneeded chips, he
said. A year earlier, Micron reported a loss of 32 cents a share
on revenue of $2.17 billion.

Micron agreed in July to acquire bankrupt Elpida for 200
billion yen ($2.07 billion). Elpida, the last Japanese maker of
computer-memory chips, sought bankruptcy protection after losses
left it unable to pay debts.

“We are in one of those windows when things feel good,”
said Alex Gauna, an analyst at JMP Securities LLC in San
Francisco who rates the shares market perform, the equivalent of
a hold.